Interview: Next Science chairman George Savvides on what’s in store for the bacteria-killing biotech
Health & Biotech
Health & Biotech
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Bacteria-fighting medical company Next Science (ASX: NXS) has caught the eye of investors since the stock listed back in April.
After raising $35m at $1 a share, the stock ran hot to a high above $4.50 in mid-June, before easing back in the second half of the year.
But markets are keeping a close eye on the company’s US-focused distribution strategy centred around Xbio — a patented product which attacks the Biofilm that protects bacteria when it forms during surgery and wounds.
Wilsons analysts Elyse Shapiro and Shane Storey recently published some detailed research with a 12-month price target of $3.46 — a 31.5 per cent premium to yesterday’s closing share price.
Stockhead recently caught up with George Savvides, Next Science’s non-executive Chairman, for a chat about the current outlook.
Savvides joined the company in July last year after a high-profile career in healthcare, including a 14-year stint as CEO of Medibank Private.
Among various takeaways, Savvides highlighted how his professional experience has helped inform his view about Next Science’s future application. The full transcript is outlined below:
Can you provide a brief overview of your career, and how that connects with what problems Next Science is trying to solve in the current market?
I think it all does connect in terms of the confidence I had in taking a governance role at NXS. I got into critical care and equipment fairly early in my career, then in 1999 I got my first exposure to a public board and the listing process with Sigma. I did five years there before I moved on to Medibank.
One of the key things I learnt at Medibank is how payers understand the health system. Because prior to that, I was a supplier and/or provider — we were always looking for someone to pay us.
But when you go to the other side as a payer, it sort of gives you a different view of the world. You start asking questions like — well how come one sixth of these surgeries have to be done a second time? And you find out one of the major causes is infection.
Then you look into that and think — well what’s an appropriate level? We had a look at the data across all of our hospitals, and found there was a signifiant variation in infection.
Some hospitals were low and some were high, irrespective of age of the patient. So those healthcare practices came into the spotlight, once we understood that some hospitals were better at safety and infection management than others.
When considering the prevalence of infection, can you add some extra detail on how NXS is offering a unique solution to the market?
In the end, the problem with current practices is they don’t try and cure the cause, they manage the infection and keep it under control. But the bugs adapt and mutate, and build an effective “bomb shelter” around the infection called biofilm.
What NXS is doing is hitting that biofilm with a complex, aggressive and non-toxic formulation. The company has worked out a way to disentangle the shelter layer, pull it apart and attack the cause of the infection. So rather than wound management, it cures the actual cause.
I think the biggest piece of unfinished business in healthcare in the world today is infection. It’s not sexy, and has been around for 100+ years. But if you have a patient with an expensive surgery that gets infected — first they pay more to get the infection out, then they redo the first surgery with less bone to work with followed by a more complex rehab process.
In that situation the payers — whether it’s Medicare or private players such as Medibank — they’re perfectly aligned on this topic because they don’t want to pay twice, and no patient wants the surgery twice either.
Having made a strong start on the ASX, what’s the company’s strategic focus over the next 12 months?
In terms of deploying the funds ($35m) raised, nothing’s changed from what we outlined the prospectus. The aim is to accelerate the development of product delivery, and we thought the time was right to get some capital and turn it into a revenue story — that was the tipping point to move to a public float.
Few irons in the fire, because in the early going there’s nothing smooth about revenue growth, it’s always lumpy. It’s busy but it’s not diluted — that’s the way Matt [NXS founder and chief technical officer Dr Matthew Myntti] runs the lab. He ensures there’s a parallel runway to product development moving into adjacent markets.
The company has taken a portfolio approach to revenue creation by product breadth, but also in terms of market penetration. We’re not just going with one partner, we’ve multiple distribution pathways and a broad enough portfolio not to have to directly pursue one hospital network.
Are there many competitors in the space that might pose a threat to Next Science’s commercial aspirations?
There’re lots of competitors out there, but when you look at the application they manage infection by lowering the bug-rate — our product removes the bug-rate.
Biofilms have become an emerging conversation among scientists and researchers in healthcare. People are starting to understand that infection isn’t just the nature of the bug, it’s the shroud that covers the bug as well.
This product is genuine innovation — it’s not so much a smart molecule in terms of pharmaceuticals, its much more a material science approach and the gross margins are very attractive.
The biggest challenge for us is driving adoption by users, to start to implement a fundamental change in medical practice.
I’m really pleased with the board that we’ve put together, and a key part of our job as a governance board is to help foster those changes to the medical landscape.